Molina Healthcare Inc. - Value

It's not a bad time to be a Medicaid plan provider as the new health care law will increase the number of people in the program. Molina Healthcare Inc. (MOH) has seen its shares surge since recently issuing optimistic revenue forecasts for fiscal 2011 and 2012. But even with the shares jumping, the company is still a value with a forward P/E of just 14.5.

Molina Healthcare provides Medicaid-related plans to low-income families and individuals in California, Florida, Michigan, Missouri, New Mexico, Ohio, Texas, Utah, Washington and Wisconsin. Currently, it services about 1.6 million members.

It also provides business processing and other administrative services to Medicaid agencies in Idaho, Louisiana, Maine, New Jersey, and West Virginia.

Bullish Outlook for 2011 and 2012

On Jan 26, Molina announced its outlook for 2011 and 2012.

Revenue for 2011 is expected to be $4.5 billion and then is projected to rise to between $5 billion and $6 billion in 2012 as more people move onto Medicaid across the country.

Earnings per share for 2011 is expected at $2.20. This was 7 cents higher than the Zacks Consensus Estimate at the time.

Zacks Consensus Estimates Move Higher

Since the announcement, analysts have been revising estimates higher. The consensus is now in line with the company's guidance at $2.20 per share. That is earnings growth of 15%.

2010 isn't expected to be too shabby either. After making just $1.19 in 2009, Molina is expected to make $1.91 per share in 2010, which is earnings growth of 61%.

The company is expected to report earnings on Feb 17. It has surprised on estimates 3 out of the last 4 quarters by an average of 41%.

Shares spiked on the news to 1 year highs.

Valuations Still Attractive

Given the P/E and the growth projections, it's not surprising the company has a PEG ratio of just 0.6. This is more attractive than some of its peers such as Amerigroup (AGP), which offers plans in 11 states, whose PEG is at 0.9.

Molina also has a low price-to-book ratio of 1.4, which is well within the value parameters of under 3.0.

Molina is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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